Czech labor minister to introduce nine key changes to pension system

Labor minister Jana Malacova (CSSD) is preparing nine key changes to the pension system instead of introducing a pension reform, she has said on Wednesday at the parliament’s budget committee. A legislative proposal containing nine key amendments should be submitted to the government in mid-December. She did not elaborate on the specific measures as they were still being drafted, but indicated that they would address the possibility for early retirement for people in demanding professions, the lower pensions of cares, as well as adjustments to savings in the third pillar of the pension system. Malacova said that she did not want to solve the problem of pension system sustainability by tightening pension rights or reducing the replacement rate. She believes that the raising of tax revenues via digital tax, higher taxation for large businesses and people with high incomes will allow for covering the higher spending on pensions. Malacova believes the planned changes would address the problem of population ageing via parametric changes.

Recall that the government of PM Andrej Babis (ANO), in its policy statement, identified as one of its six key priorities the implementation of a pension reform. However, on Monday it decided that it would not raise the retirement age cap from the current 65 years. Commenting on the decision, the National Budget Council head Eva Zamrazilova said that maintaining the current retirement age cap at 65 years would mean a gradual increase in pension-system deficits to up to 4% of GDP per year in the next four decades, with the annual spending on pensions exceeding the system’s revenues by CZK225bn in current prices. She also said that the problem would shrink by a half if the condition of one-quarter of life in retirement, anchored in law, were observed and if the life retirement limit were adjusted accordingly. Zamrazilova underlined that given the current forecasts of the structural balance development in the years to come, keeping the retirement age cap unchanged would lead to a complete exhaustion of the fiscal policy’s maneuvering space in the future.

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